Guatemala Economy

Guatemala Economy


  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax System

Basic data

Guatemala is the largest economy in Central America with a GDP of about USD 86 billion. The COVID-19 pandemic and hurricanes Eta and Iota ended three decades of economic growth in Guatemala. Even so, the country experienced one of the smallest GDP declines in 2020 in the Latin American region (-1.8%), and economic activity recovered to pre-pandemic levels the very next year, supported by a record inflow of remittances. GDP growth in 2021 reached the highest in history in the last 44 years, namely 7.5%. A stable growth of around 3% is expected in the following years. Check ebizdir for economical facts of Guatemala.

Although Guatemala runs a budget deficit every year, it is a regional leader with a debt of only 40% of GDP. Inflation in 2021 was 3.1% (i.e. within the target range of 3-5% by the central bank), however, in view of the Russian-Ukrainian crisis, inflation is expected to be higher in 2022 (provisional estimates show inflation of around %). A key role in the economy is also played by the annually increasing foreign remittances (primarily from the Guatemalan diaspora in the USA), which reached a record amount of USD 15 billion in 2021 with a year-on-year increase of 35%. Remittances in Guatemala make up around 15% of GDP and thus significantly strengthen the purchasing power of the population.

The largest employer in the country is the agricultural sector with 30% of the population contributing 10% to the country’s GDP. This ratio is decreasing every year, while the share of industry (22%) and services (62%) in GDP is increasing. The trade balance is significantly in deficit, which is caused by the export of products with low added value, and, conversely, the necessity of importing consumer goods and technology. The main export items are mainly cardamom, sugar, coffee, knitted clothes, fruit (especially bananas) and vegetables. Fuels, machinery and transport equipment, construction materials, grain, fertilizers, electricity, mineral products, chemical products, and plastics predominate in imports.

Pointer 2019 2020 2021 2022 2023
GDP growth (%) 4 -1.8 8 3.8 3.5
GDP/population (USD/PPP) 8,519.00 8,330.00 8,740.00 8,970.00 9,130.0
Inflation (%) 3.4 4.8 3.1 6.5 4.9
Unemployment (%) 2.7 4.7 3.6 3.5 3
Export of goods (billion USD) 11.2 10.9 12.3 13.2 13.4
Import of goods (billion USD) 19.9 18 24.9 27.3 29.3
Trade Balance (Billion USD) -8 -6.3 -11.2 -12.6 -14.1
Industrial production (% change) 3.8 -2.5 6 4.3 5.1
Population (millions) 17.6 17.9 18.3 18.7 19
Competitiveness ON ON ON ON ON
OECD export risk 04.VII 04.VII 04.VII ON ON

Source: EIU, OECD, IMD

Public finance and state budget

Public finance 2021
State budget balance (% of GDP) -1.2
Public debt (% of GDP) 42.6
Current account balance (billion USD) 2.8
Taxes 2022
AFTER 25% + 1%
F.O 5-7%
VAT 12%

The fiscal deficit has been on a downward trend in recent years, and is expected to gradually decrease from 1.2% of GDP in 2021 to 0.2% of GDP in 2026 (assuming an expected economic growth of 3.3% of GDP on average annually). Although it has a deficit budget every year, Guatemala is the premiant of the region in terms of indebtedness, with a debt amounting to around 40% of GDP. The debt-to-GDP ratio is low by emerging market standards and will allow the government to maintain reasonable access to external financing from bond markets on reasonable terms.

Banking system

The Guatemalan banking system can be divided into two segments:

(1) The formal (regulated) financial sector is made up of institutions that are subject to a special state permit from the Monetary Board and are controlled by the Superintendence Bank of Guatemala (Superintendencia de Bancos de Gautemala, SIB). This sector includes the banking system and the non-banking system. The first, the banking system, mainly includes the Central Bank (Banco de Guatemala), which regulates this segment. The interest rate is currently around 1.75% with an expected growth of up to 3% in 2023. In addition to the central bank, this sector also includes commercial banks and financial corporations, which are defined by law as institutions specialized in investment banking operations. The non-banking financial system is governed by special laws and consists of insurance companies, securities trading companies,

Guatemala’s largest banks include:

  • Banco Industrial,
  • Banco G&T Continental,
  • Banco Agromercantil de Guatemala,
  • Banco de América Central, SA,
  • Banco de Desarollo Rural.

All commercial banks provide standard banking services.

(2) Informal or unregulated financial sector, which consists of institutions performing financial intermediation, the authorization of which corresponds to the general legal basis (commercial code) and is not under the supervision of the Supervisory Bank. Financial intermediaries in this sector are usually innovative and provide services that do not allow loans to regulated entities. Among them, for example, the supply and demand for securities, as well as credit associations, savings and loan cooperatives and other non-governmental organizations that provide financial services mainly in rural areas.

Tax system

At first glance, Guatemala’s tax system is relatively clear and stable, but its problem is low efficiency and arbitrariness in application and enforcement. This is also why the total tax collection contributes only 12.5% ​​to GDP (the lowest in all of Latin America).

Legal entities are taxed under the so-called standard regime (1) or simplified regime (2):

  1. Under the standard regime, the net taxable income of companies is taxed at a rate of 25%. In addition, 1% of total assets or gross income (whichever is greater) is added.
  2. Under the simplified regime, monthly gross income is taxed at a rate of 5 or 7%, depending on the type of income.

In the case of a branch of a foreign company, transfers to the parent are taxed at a rate of 5%, as are dividends in the case of a resident company.

For individuals with an income of up to 300,000 The GTQ rate is 5%, for higher income it is 7%. In the case of non-residents, it is 15%. A tax discount of 48,000 GTQ is applicable, i.e. these persons do not have to file a tax return. The tax rate on capital gains is 10%.

VAT is applied to most goods at a rate of 12%. The rate is zero for basic necessities (especially most basic foods).

No changes to Guatemala’s tax system are expected in the near term.

Guatemala Economy